When residential mortgage rates crossed 7% last November, home sales slowed sharply, and it looked like the housing markets in Denver and other hot metro areas were finally entering a new and more favorable phase for buyers — lower prices, wider selection and less competition.
After peaking in April of last year at $600,000, the median price of a single-family home sold in Colorado started heading lower, getting all the way down to $520,000 in January, according to. That 13% decline represented genuine relief for buyers on the edge of affordability. “You might say the market for buyers and sellers is all over the road until both find the lane that’s moving in a mutually profitable direction,” Hardy said.Normally, higher mortgage rates push more buyers out of the market, crimping demand and resulting in a larger inventory of homes for sale. Rather than wait around, sellers start discounting, which helps improve affordability and draws in more buyers. But the market has been anything but normal following the pandemic.
Most owners holding a mortgage won’t take the handcuffs off unless they absolutely have to, say because of a job relocation or divorce, or if they can have enough equity to put down to dampen the hit. “High mortgage rates are a double whammy because they’re discouraging both buyers and sellers – and they’re discouraging sellers so much that even the buyers who are out there are having trouble finding a place to buy,” said Redfin Deputy Chief Economist Taylor Marr“Mortgage rates probably won’t drop below 6% before the end of the year, and most homeowners wouldn’t be motivated to sell unless rates dropped further.
And it is worth mentioning that about 38% of homeowners, many of them in or approaching retirement, have paid off their mortgages and are sitting on a large pile of home equity. They aren’t encumbered by the golden handcuffs and the current rebound from the recent price swoon might motivate them to take action.